An article from the Online Journal quotes Henry Paulson:

Treasury Secretary Henry Paulson delivered an upbeat assessment of the slumping real estate market on Friday saying, “All the signs I look at” show “the housing market is at or near the bottom.”

Paulson added that the meltdown in subprime mortgages was not a “serious problem. I think it’s going to be largely contained.”

It’s difficult to see how "containment" can be achieved though when subprime mortgages are out there masquerading as less risky loans.  One of the methods being used to gussy up a subprime borrower is to use a "credit repair" service.  From a thread on Broker Outpost yesterday:

Companies claim to raise FICO credit scores by 50 to 250 points by adding low-scoring borrowers as "authorized users" on the credit card accounts of people with FICO scores well in excess of 700. The positive payment information from such cardholders then flows into the files of the persons with subpar credit.

Federal law permits authorized users to be added to credit card accounts. Typically the users are relatives or friends of the primary cardholder.

Federal law, however, does not limit the number or prescribe the type of authorized users permitted on any single account. Nor does it prohibit the rental or sale of authorized user designations. Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit card "trade lines" or accounts of credit card holders with high limits combined with perfect payment histories.

Some website promoters say they can add 80 to 120 authorized users onto a high-quality credit card account before banks or lenders get suspicious. Each account can rent for as much as $1,500 to $2,000 for a 180-day usage. The primary credit card holder receives a cut of the rental fee, often hundreds of dollars for each authorized user added to the account.

The person seeking a higher credit score does not obtain actual access to the credit card. But within 30 to 90 days of being added to the account, the national credit bureaus incorporate the primary cardholder’s ongoing account information into the files of the authorized user. The score-raising attributes of the primary cardholder’s stellar payment record then flow through to the new user.

These services obviously won’t improve the credit worthiness of borrowers, but will make borrowers appear to be a better risk than they actually are. 

It seems unlikely that subprime problems will stay contained in subprime, when mortgage fraud such as this puts risky borrowers in less risky loan products.